Powell Industries (POWL) Q4 2004 earnings summary

Executive summary

• FY2004 was pressured by weak demand, competitive pricing and higher commodity costs; rising orders late in the year supported expectations for recovery in FY2005.

• Manufacturing consolidation and facility upgrades were intended to lower overhead, improve efficiency and strengthen competitiveness.

Financial highlights

• FY2004 revenue fell 19% YoY to $206.1M; gross profit was $36.0M, down from $48.8M.

• Operating income before interest and taxes was $0.6M vs. $13.5M; net income was $1.7M vs. $7.0M.

• Diluted EPS was $0.15 vs. $0.65; FY2003 included a $0.05/share goodwill impairment charge.

• FY2004 COGS included $1.8M of one-time consolidation costs; SG&A included $0.4M of consolidation costs.

• Excluding nonrecurring tax adjustments, the FY2004 effective tax rate would have been 40%, versus the reported tax benefit and 45% rate in FY2003.

Outlook and guidance

• Expected principal markets to strengthen during FY2005, supported by stronger customer inquiries and order activity in H2 FY2004.

• Consolidation savings and manufacturing improvements were expected to reduce overhead and improve efficiency and competitive position.

• Working capital needs were expected to rise with business activity; cash, borrowing capacity and operating cash flow were viewed as sufficient for operations, investment, debt repayment and potential acquisitions.

• Commodity inflation was expected to continue adversely affecting FY2005 results.